They anticipate no loss of momentum and predict a full-year organic growth rate of 7.0% in 2021. “The hard market in the property-casualty business and the favorable economic environment are expected to continue for the remainder of the year,” says Brian McNeely, Reagan Consulting partner.
“There are still some lingering cost savings from the pandemic, but they are waning,” says McNeely. Pandemic-related cost savings — for example, reduced travel, entertainment, advertising, and auto expenses —contributed to higher margins this year. But these selling expenses should return soon to pre-pandemic levels, he says.
Individual lines
Commercial lines continued to lead growth, building on a trend from Q1 2021. Commercial lines posted an all-time-high organic growth rate of 9.2%, while the previous Q2 high was 8.2% in 2013. Significant premium price increases for several products are helping to push the growth — including a 19.7% increase in umbrella prices followed by an 18.0% increase in cyber prices. Other products with premium hikes at 9.0% or higher are commercial auto, employment practices, commercial property, and directors and offices insurance.
Personal lines posted a decline in Q1 2021, but are now rallying with a Q2 2021 organic growth rate of 2.1%, the historical Q2 average.
Group benefits still trail behind their historical averages, but did increase from 2.1% organic growth in Q1 2021 to 3.1% in Q2 2021 — tying “with Q2 2010 for the most anemic Q2 result ever,” says McNeely.
Public brokers
For the second time in GPS history, public brokers surpassed the performance of independent brokers and agents by 2.9 percentage points in Q2 2021, posting an organic growth rate of 10%. In explaining that growth, McNeely observes that public brokers operate in both national and international arenas, and their broader geographies better capture the benefits of market hardening and economic recovery. Additionally, public brokers usually write larger accounts, and some of the specialty coverages they sell have seen “dramatic price increases in early 2021,” he says.
About Reagan Consulting
Reagan Consulting is a management consulting firm providing strategic consulting, valuation, capital raising, and merger-and-acquisition (M&A) services to the independent insurance distribution system. The firm’s services for insurance agents and brokers, bank-owned agencies and other participants in the insurance distribution marketplace include: appraisals of fair market value, capital raise advisory, mergers and acquisitions advisory, ownership perpetuation planning, strategic planning facilitation, key employee compensation and equity plan design, and agency performance benchmarking. Reagan Consulting co-developed the well-known Best Practices Study and produces the quarterly Growth & Profitability Survey.